Home prices are expected to decline for the sixth month in a row, as housing continues to be a drag on the post-recession recovery. A survey of 31 economists polled by Bloomberg predicted that home prices through February 2012 will fall by 3.4 percent compared to this time last year.
Standard and Poor’s/ Case-Shiller home price indices, the top indicator for home values, will be released tomorrow.
The expected decline, however, is lower than previous months. Prices dropped by 3.8 percent through January, and 4.1 percent through December. Currently, homes are worth what they were in 2003.
National home prices will drop until the supply of homes comes into balance with demand of homebuyers, according to Guy Lebas, an analyst at Janney Montgomery Scott.
“The main problem is supply and demand,” said Lebas. “It is still not favorable.”
The average supply of homes is a little less than six months, which is considered healthy for the market. Lebas, however, said that the number does not take into account a large amount of distressed properties that have not yet gone on the market.
“An additional six to nine months of supply exist in the shadow market,” said Lebas.
The problem is not that people don’t want to purchase homes, said Lance Roberts, an economist with Streettalk Advisors, but that there are just too many houses on the market.
“It’s not that people aren’t buying, there’s just an imbalance in the supply and demand,” Roberts said. “We’re in a clear downward trend.”
Tomorrow’s report is likely to add to troubling developments for the housing sector.
Home starts, construction of new homes, dropped in March by almost 6 percent. Economists think that the unusually warm winter weather might have increased home building earlier in the year. Meanwhile, previously owned homes are getting cheaper and therefore more attractive to homebuyers.
Homeowners are still dealing with the effects of the housing bust. One out of every five homes are underwater – - meaning the value of their home is worth less than their mortgage.
The economy as a whole is showing mixed signals.
Job growth, which is key to improving the demand for homes, stalled in March – - with only 120,000 jobs added. Consumer confidence declined by 1.4 points in March.
Manufacturing, however, remains healthy and inflation, according to the CPI, is in check.